Japanese refiner Cosmo Oil is looking to buy May Canadian heavy sour crude as a result of improving economics, a company source said Friday.
In the past, Cosmo has bought Cold Lake Blend from Canada and the source said an arbitrage window had opened up for it to buy and import May Canadian output at a profit.
"Although Canadian heavy sour crudes cannot be processed directly in our refineries in Japan, we have in the past blended it to meet our refineries' capabilities," the source said, adding: "We have not bought any Canadian crude for May yet."
Cosmo has four refineries with a total capacity of 635,000 b/d in Japan.
The May WTI-Dubai swaps spread was pegged at minus $14.05/b Friday while May WCS, the benchmark for Canadian heavy sour crudes, is being talked at WTI minus $17.85/b, with Cold Lake trading at a $1.25/b discount to WCS, according to Platts data. This equates to May Cold Lake trading at about a $33.00/b discount to May Dubai.
Dubai is the benchmark for Asian sour crudes.
The cost of moving a 650,000 barrel cargo from Burnaby, British Columbia, to Japan ranges from $1.50/b to $3.85/b. The $1.50/b freight rate is when a vessel is found along the West Coast but freight rises to $3.85/b when a vessel must come from across the Pacific.
Canada in 2011 exported an average of 1.54 million b/d of heavy crude, of which 99.2% went to the US and the remaining 0.8% to Asia, according to National Energy Board statistics.
Traders said the bulk of the 0.8% of Canadian heavy crude exports went to China.
